International business is business that is conducted across national borders. It includes any resources needed to produce a company’s goods or services, such as people, skills and capital.
When companies expand their business dealings beyond the borders of their country of origin, they need to be aware of many issues. For instance, they need to be aware of not only the laws of their home country, but of the laws in countries in which they do business, and also any international law that may apply.
Some of the major types of international business are:
- Exports/Imports of merchandise, or of services;
- Licensing (to use intellectual property, such as a patent);
- Franchising: some major international franchises are McDonald’s and Starbucks;
- Partnerships and Joint Ventures (the joining of two or more companies);
- Foreign direct investment (a company bases operations in a foreign country to save money); and
- Turnkey Projects: the company hires an independent contractor to get the business up and running, after which it assumes control.
A company that is doing business in a foreign country should take note of many business-related issues. They should be aware of that foreign country’s:
- Economic policy;
- Political structure;
- Environmental standards;
- Labor standards; and
- Legal structure/laws.
As stated above, an international business is responsible for abiding by laws of their own country and of a country in which they do business. They may also be responsible for abiding by international law, when it applies.
International law governs relations between different nations, and business is one of the most important types of relations between nations. International law consists of a blend of different treaties, organizations, and agreements among countries. International law is created from a combination of:
- Treaties and International Agreements: These are basically contracts between two or more nations. If the highest power of each nation agrees to it, then the treaty becomes binding. For example, international treaties created a trade agreement between the United States and many other nations (known as NAFTA). Disputes regarding treaties may be handled by courts, such as the International Court of Justice, if they cannot be resolved by the parties themselves.
- International Organizations and Conferences: International organizations and conferences establish uniform international laws by adopting resolutions and other standards for all participating nations. The World Trade Organization (WTO) is an example of an international organization which holds conferences to decide important issues.
- International Customs: These usually consist of universal customs that many nations follow. For example, murder is universally considered a crime. There are universal customs in the business realm as well.
It should be noted that above, it mentions that parties may have their disputes resolved by international courts. Participation in treaties and in international organizations is generally voluntary, so enforcement of principles may become informal. For example, one country may impose tariffs on another, to create economic distress and force a change on an issue.
International laws regulate international business transactions. International law provides rules and remedies that nations agree to follow. Here are a few types of regulations:
- Tariffs taxes on imports;
- Quotas that limit amount of imports;
- Requiring business deals to be done in good faith; and
- Compensation for foreign investors if a country’s government confiscates their property
When a legal dispute arises between parties from different countries, there are can be many difficult issues. If you have an international business dispute, there are local business attorneys who specialize in international law. Contact such an attorney to learn more about your rights, defenses, and the complicated issues that may arise.